Why are all pages redirecting to homepage when using custom permalinks?

Question

Here’s my .htaccess … there are a few differences, perhaps it might be worth comparing:

# BEGIN WordPress
<IfModule mod_rewrite.c>
RewriteEngine On
RewriteBase /
RewriteRule ^index\.php$ - [L]

# uploaded files
RewriteRule ^files/(.+) wp-includes/ms-files.php?file=$1 [L]

RewriteCond %{REQUEST_FILENAME} -f [OR]
RewriteCond %{REQUEST_FILENAME} -d
RewriteRule ^ - [L]
RewriteRule . index.php [L]
</IfModule>

Also, I assume you have tested this without any plugins enabled?